Financial Reporting Quality: Aggregate Accruals
Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.
Balance-Sheet-Based Accruals Ratio
Palantir Technologies Inc., balance sheet computation of aggregate accruals
US$ in thousands
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Operating Assets | ||||||
| Total assets | 6,340,884) | 4,522,425) | 3,461,239) | 3,247,450) | 2,690,504) | |
| Less: Cash and cash equivalents | 2,098,524) | 831,047) | 2,598,540) | 2,290,674) | 2,011,323) | |
| Less: Marketable securities | 3,131,463) | 2,843,132) | 35,135) | 234,153) | —) | |
| Operating assets | 1,110,897) | 848,246) | 827,564) | 722,623) | 679,181) | |
| Operating Liabilities | ||||||
| Total liabilities | 1,246,477) | 961,460) | 818,802) | 956,420) | 1,167,954) | |
| Less: Debt, noncurrent, net | —) | —) | —) | —) | 197,977) | |
| Operating liabilities | 1,246,477) | 961,460) | 818,802) | 956,420) | 969,977) | |
| Net operating assets1 | (135,580) | (113,214) | 8,762) | (233,797) | (290,796) | |
| Balance-sheet-based aggregate accruals2 | (22,366) | (121,976) | 242,559) | 56,999) | —) | |
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | — | — | — | — | — | |
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| Accenture PLC | 35.69% | 16.32% | 21.70% | 27.93% | 3.73% | |
| Adobe Inc. | -3.83% | 1.85% | -8.24% | 14.14% | 8.20% | |
| Cadence Design Systems Inc. | 39.84% | 11.17% | 26.65% | 4.43% | — | |
| CrowdStrike Holdings Inc. | — | — | — | — | — | |
| Fair Isaac Corp. | 6.46% | 12.11% | -3.66% | -6.17% | -0.02% | |
| International Business Machines Corp. | 2.79% | 2.42% | 1.55% | -7.39% | — | |
| Intuit Inc. | 3.35% | -1.74% | 85.68% | 139.73% | -1.39% | |
| Microsoft Corp. | 52.18% | 22.96% | 42.27% | 40.52% | 14.41% | |
| Oracle Corp. | 4.30% | 51.77% | 9.90% | 5.62% | — | |
| Palo Alto Networks Inc. | 89.91% | 137.01% | -124.73% | 85.21% | 69.06% | |
| Salesforce Inc. | -2.46% | -2.30% | 57.74% | 10.87% | — | |
| ServiceNow Inc. | 22.91% | 61.79% | 12.89% | 34.89% | — | |
| Synopsys Inc. | 7.85% | 13.85% | 5.01% | 0.36% | 8.40% | |
| Workday Inc. | 28.44% | -11.24% | 55.93% | -15.99% | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Software & Services | 26.35% | 18.48% | 29.42% | 16.66% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Information Technology | 21.42% | 8.98% | 18.09% | 19.16% | — | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= 1,110,897 – 1,246,477 = -135,580
2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= -135,580 – -113,214 = -22,366
3 2024 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -22,366 ÷ [(-135,580 + -113,214) ÷ 2] = —
4 Click competitor name to see calculations.
- Net Operating Assets
- The net operating assets show a fluctuating trend over the observed periods. Initially, there is a significant negative value of -233,797 thousand US dollars at the end of 2021, followed by a positive value of 8,762 thousand US dollars at the end of 2022. Subsequently, the value declines again to -113,214 thousand US dollars in 2023 and further decreases to -135,580 thousand US dollars in 2024. This pattern indicates volatility with a temporary improvement in 2022, but an overall negative net operating asset base in most years.
- Balance-sheet-based Aggregate Accruals
- This financial item demonstrates considerable variation, beginning with a positive value of 56,999 thousand US dollars in 2021, then escalating sharply to 242,559 thousand US dollars in 2022. The value then reverses to negative territory at -121,976 thousand US dollars in 2023 and moves closer to zero at -22,366 thousand US dollars in 2024. The substantial increase in accruals in 2022 followed by a significant decrease and eventual negative values suggests changes in accounting estimates or financial activities impacting accruals substantially across these years.
- Balance-sheet-based Accruals Ratio
- No data has been reported for the balance-sheet-based accruals ratio across all periods. The absence of this ratio restricts the ability to analyze the relative significance of accruals in relation to net operating assets or overall asset base, potentially limiting the assessment of financial reporting quality trends related to accrual management.
Cash-Flow-Statement-Based Accruals Ratio
Palantir Technologies Inc., cash flow statement computation of aggregate accruals
US$ in thousands
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Net income (loss) attributable to common stockholders | 462,190) | 209,825) | (373,705) | (520,379) | (1,166,391) | |
| Less: Net cash provided by (used in) operating activities | 1,153,865) | 712,183) | 223,737) | 333,851) | (296,608) | |
| Less: Net cash used in investing activities | (340,655) | (2,711,180) | (45,427) | (397,912) | (14,920) | |
| Cash-flow-statement-based aggregate accruals | (351,020) | 2,208,822) | (552,015) | (456,318) | (854,863) | |
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | — | — | — | — | — | |
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| Accenture PLC | 24.31% | -0.19% | 11.87% | 11.80% | -13.65% | |
| Adobe Inc. | -21.90% | -21.73% | -19.93% | 9.21% | -0.48% | |
| Cadence Design Systems Inc. | 17.36% | 3.78% | 15.03% | -5.75% | — | |
| CrowdStrike Holdings Inc. | — | — | — | — | — | |
| Fair Isaac Corp. | -8.60% | -2.41% | -13.92% | -17.25% | -10.25% | |
| International Business Machines Corp. | -3.73% | 0.99% | -7.22% | -1.64% | — | |
| Intuit Inc. | -8.44% | -8.74% | 25.60% | 58.72% | -34.22% | |
| Microsoft Corp. | 30.89% | 5.22% | 13.42% | 17.68% | -8.19% | |
| Oracle Corp. | -1.01% | 42.79% | -30.58% | 25.81% | — | |
| Palo Alto Networks Inc. | 33.84% | -37.95% | -196.64% | -68.30% | -488.47% | |
| Salesforce Inc. | -8.44% | -8.49% | 21.96% | 10.57% | — | |
| ServiceNow Inc. | -7.12% | 15.44% | 8.80% | -21.14% | — | |
| Synopsys Inc. | -7.64% | 0.20% | -4.64% | -4.88% | 0.92% | |
| Workday Inc. | 34.56% | 18.64% | -0.65% | -18.51% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Software & Services | 12.10% | 7.37% | 1.97% | 11.15% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Information Technology | 6.29% | 1.46% | 2.91% | 8.62% | — | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -351,020 ÷ [(-135,580 + -113,214) ÷ 2] = —
2 Click competitor name to see calculations.
The financial data reveals notable fluctuations in the net operating assets and cash-flow-statement-based aggregate accruals over the four-year period.
- Net operating assets
- The net operating assets showed a significant negative position in 2021 at -233,797 thousand US dollars, then shifted to a positive balance of 8,762 thousand US dollars in 2022. Subsequently, the figure declined again, returning to negative values of -113,214 thousand US dollars in 2023 and further to -135,580 thousand US dollars in 2024. This pattern indicates considerable volatility in the company's operating assets, with a brief improvement in 2022 not sustained in subsequent years.
- Cash-flow-statement-based aggregate accruals
- The aggregate accruals presented a persistent negative trend from 2021 to 2022, decreasing from -456,318 thousand US dollars to -552,015 thousand US dollars. However, in 2023, there was a marked reversal, with aggregate accruals rising dramatically to 2,208,822 thousand US dollars, signifying a substantial positive adjustment. In 2024, the accruals again declined sharply to -351,020 thousand US dollars, reverting to a negative position.
- Cash-flow-statement-based accruals ratio
- No data is available for the accruals ratio across all periods, limiting the assessment of accruals relative to cash flow.
Overall, the data indicate significant variability and inconsistency in the financial reporting quality measures, with alternating signs and magnitudes in operating assets and accruals. Such fluctuations could imply challenges in asset and accrual management or reflect broader operational and accounting dynamics during the observed timeframe.